July 27, 2018
The Financial Services Council (FSC) will extend its mandatory Life Insurance Code of Practice (LICP) to cover superannuation trustees in a move which tackles criticism about the effectiveness of a voluntary code released an industry working group last year.
The FSC made the announcement at its recent annual Summit where it stated it has taken the voluntary Insurance in Superannuation Voluntary Code of Practice developed by the Insurance in Superannuation Working Group (ISWG) and would make it mandatory for all superannuation trustee members of the Council.
The existing LICP, which applies to life insurers and was released last year, would become the first chapter of the combined code and the provisions related to trustees would form a new second chapter which would cover the current 15 superannuation trustee members of the FSC.
Both parts of the LICP would be enforced by the independent Life Code Compliance Committee and administered by the Financial Ombudsman Service (FOS) and transition over to the Australian Financial Complaints Authority with FOS.
The creation of a single combined code was a recommendation from the Parliamentary Joint Commission Inquiry into Life Insurance and the recent draft report of the Productivity Commission’s review of superannuation.
“I believe the ISWG Code can achieve meaningful change…provided it is a mandatory Code and is applied consistently…”
Addressing the Summit, the Minister for Revenue and Financial Services, Kelly O’Dwyer said the combined mandatory code addressed some concerns the Federal Government had about the Voluntary Code which came into effect on 1 July 2018.
“When it was released, I expressed strong concern that the industry had walked away from a commitment to a robust and mandatory code of practice to address the many issues in group insurance in super,” O’Dwyer said.
The Minister added the Government had decided to act on its own regarding the issue of providing life insurance in on an opt-in basis (see: Group Life to Become Opt-In for All Younger Members) but was pleased the FSC would take elements of the ISWG Code and make it binding on the industry.
“I believe the ISWG Code can achieve meaningful change in areas such as claims handling and member disclosure, provided it is a mandatory Code and is applied consistently across the whole industry,” O’Dwyer said.
“I commend the FSC on its action to date and encourage the Council to continue its journey towards ASIC approval of a binding and holistic Code for the entire life insurance and superannuation sector,” the Minster added.
The revised, combined Code will be released later this year for public consultation and is expected to be adopted by FSC life insurance and superannuation members by 1 July 2019.